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Define Physical Destination 
Communication between the SAP system and a sales/use tax package are established using RFC (Remote Function Call). You must create an RFC destination that specifies the type of communication and the directory path in which the tax package executable or shell scripts program is installed. You must set up the RFC destination as a TCP/IP communication protocol. The destination is user-defined.

This setup is frequently an area of concern. An understanding of the directory path is of utmost importance.
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1. To define a physical destination, in Customizing for Financial Accounting, choose Financial Accounting Global Settings ® Taxes on Sales/Purchases ® Basic Settings ® External Tax Calculation ® Define Physical Destination.
2. Choose Create.
3. Select and enter a logical name for the RFC Destination, for example, VERTEX or TAXWARE.
4. Enter T (Start an external program via TCP/IP) for Connection type.
5. Enter a short description text and choose enter.
6. Define the directory path.
This is the directory path in which the tax package executable or shell script program is installed.
There are two recommended methods to define the directory path:
· SAP and Tax Software Package reside on the same server
If the SAP
system and the external tax package are to reside on the same server, choose
Application Server to select as the
program location. In the field Program, specify the external tax
package’s executable or shell script program, along with the directory
path in which it was installed. Choose
.
· SAP and Tax Software Package reside on different servers
If the SAP
system and the external tax package were to reside on different servers, then
this is an explicit communication setup. Choose Explicit host. In the field Program, specify the external tax
package’s executable or shell script program along with the directory
path in which it was installed. In the field Target Host, enter the host name of the
server where the external tax package resides. Choose
.
7. If necessary, set up the correct SAP gateway host and gateway service.